Fresh & Easy owner may shut grocery store chain

By George AvalosOakland Tribune

Posted:
12/05/2012 08:44:28 PM PST

Updated:
12/05/2012 08:44:40 PM PST

Click photo to enlarge

Employees fill in the shelves in preparation for the grand opening of a Fresh & Easy store on Diablo Road in Danville, Calif., on Tuesday, March 1, 2011. The 12,000-square-foot market features plenty of fresh produce and easy to warm up prepared meals from the Fresh & Easy kitchen campus in Riverside. (Susan Tripp Pollard/Staff)

The British owner of Fresh & Easy Neighborhood Market said Wednesday it is undertaking a sweeping review of the money-losing grocery store chain, setting the stage for a high-profile failure of a retail group that entered the Bay Area with much fanfare less than two years ago.

Fresh & Easy, which has 19 stores in the Bay Area, arrived here promising to deliver a new approach -- relatively small stores of about 10,000 square feet to 15,000 square feet. The grocer's parent company is England-based Tesco, the world's fourth-largest food retailer.

"This obviously was not a very good concept," said David Livingston, a Milwaukee-based retail analyst. "Fresh & Easy really was a failure from the start."

In October, Tesco signaled its concerns about Fresh & Easy, saying it would keep tight reins on new capital investments in the grocery chain while cutting costs and improving profitability.

Tesco said Fresh & Easy had many positive factors in its favor, but apparently not enough of them.

"Its journey to scale and acceptable returns will take too long relative to other opportunities," Philip Clarke, Tesco's chief executive officer, said in a prepared release. "I have therefore decided to conduct a strategic review of Fresh & Easy, with all options under consideration."

Multiple parties have approached Tesco with an interest in buying all or part of Fresh & Easy or becoming a partner, said Tesco, which didn't identify the companies, groups or individuals interested in Fresh & Easy.

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While its fate is being decided, Fresh & Easy will remain focused on its customers and employees, according to spokesman Brendan Wonnacott.

"It is business as usual in our stores," Wonnacott said. "We look forward to bringing our neighbors the same delicious, wholesome and affordable food they have come to expect from Fresh & Easy."

The grocer's 19 Bay Area stores employ about 500 workers. Fresh & Easy has five stores in Santa Clara County, including three in San Jose; five in Contra Costa County, three in Alameda County, three in San Francisco, and single stores in San Mateo, Napa and Solano counties. The market chain has 165 stores in California.

Perhaps the biggest stumble for Fresh & Easy was that it failed to carve out its own distinct niche in California.

"The brilliance of a store like Trader Joe's is it sells things that no one else sells," said Patty Edwards, chief investment officer with Trutina Financial in Washington state. "Fresh & Easy sold some things that no one else had, but it wasn't unusual enough to get the cult following that Trader Joe's has."

That lack of differentiation appears to have hurt Fresh & Easy at a time when supermarket wars have intensified in the Bay Area with expansions in the grocery business from Whole Foods, FoodCo., Sprouts Farmers Markets, Trader Joe's, Walmart, Target and Safeway.

"Fresh & Easy made a lot of promises that raised consumers' expectations," Livingston said. "They tried to sell the consumer that they would have Whole Foods quality with Walmart pricing. That never came to pass."